“Credit reports are unwieldy and oftentimes unintelligible to consumers, and credit scores are nothing more than a flat three digit number,” said Ken Lin, CEO of Credit Karma. “The Credit Report Card is just like a school report card. It grades consumers on each component of their credit health and allows them to easily understand what impacts their credit score, and provides guidelines on how to optimize their credit.”

Credit Report Card enables consumers to see the five major influencers on their credit score in detail, grades the consumer’s credit health overall, and provides specific steps to improve each specific metric, including:

– Credit card utilization
– Length of credit
– On time payment history
– Total accounts
– Credit inquiries

“The consequences of a poor credit score are much higher today than they were even a few years ago,” said Jim Bruene, Founder of Online Financial Innovations. “Not only can consumers be denied credit outright, they may face higher prices for insurance, apartments, and auto loans. Even worse, employers are using credit scores to screen-out job applicants. Today’s cost-conscious consumer must track their credit score and, when necessary, take steps to improve it.”

In addition, consumers can also compare credit metrics on a curve: ranking their credit metrics in relation to other Credit Karma members, providing consumers with a benchmark for understanding how their credit score compares across each metric. Consumers can see how a change in any key metric can impact their credit score as well as prioritize which areas to focus on based on potential impact on their credit score.

“Without Credit Karma’s new tool, the only real information consumers have at their disposal are seemingly arbitrary credit scores and lengthy unintelligible credit reports, which contain hundreds of variables and offer no real context or useful advice,” said Lin. “Since credit reports were developed for lenders for the purpose of evaluating borrowers and setting fees, there have been few services developed to educate consumers — many of whom could save a million dollars or more over their lifetimes through better credit management.”

About Credit Karma
Credit Karma, the consumer’s advocate for demystifying credit, is the only Web site that provides consumers free access to their credit score, plus a range of tools and information resources to help them monitor and manage the credit aspect of their financial health. Credit Karma’s goal is to help consumers easily digest the contents of their credit report and understand what makes up their credit score. Credit Karma works with a range of partners, including mortgage lenders, credit card providers, banks, and wireless providers.

Source: Credit Karma

The fact is free annual credit reports are not really that useful to consumers because it wasn’t meant for consumers to use to fix credit history discrepancies. Furthermore, it’s not timely or current. Yet, I don’t see any of the media making that distinction? So who is fooling who?

Ok, here’s the thing, I’m not a credit reporting expert but I learned the hard way about credit scores and high interest rates. I couldn’t figure out why! I have a darn good credit history, applied for a Discover Card yet I was denied. Ordered my free annual credit reports but couldn’t find anything wrong with. I asked a friend who was in the lending business and helped me understand what was going on. Basically, banks, credit card companies and other credit institutions use a credit scoring method developed by FICO (I won’t go into detail but it’s an acronym) called a FICO score. Long story short, it uses the three major credit bureaus; Experian, Trans Union and Equifax to come up with a number from 0 – 850 (could be wrong). If you score high 700s you are less risky and will get a really good interest rate for loans if you’re below 700 you’ll get high rates or get declined. Oh and each credit bureau has their own credit score, my FICO score was 760 while my lowest score was a 695 at Equifax and highest was a 780 at Experian. Turns out that Discover based their decision on Equifax at the time!

I signed up for a credit report service and checked each report from the bureaus side-by-side and found several mistakes. The service I used didn’t have instructions on how to report errors in a credit file so I went back to my buddy in lending business and he basically helped me find letters that I sent to Equifax. He also recommended that I check an updated report to make sure the mistakes were eventually fixed. I did receive confirmation of the discrepancies from Equifax and they made the changes which bumped my score to 720. I re-applied and got my Discover Card…although I never use it anyway.

The morale of the story is that you need to check your report more than once and at all three bureaus since the scores vary widely due to misinformation keyed in by data entry folks at the bureaus or whatever…my gripe with the FTC and the media is that they don’t come clean about the very issues I raised above and whether the free annual credit report is appropriate for that use. Oh well

The FTC even issued a press release:

The Federal Trade Commission today released two videos that highlight the differences between AnnualCreditReport.com and those other sites that claim to offer “free” credit reports. Despite the musical claims of some TV commercials, the only authorized source to get your free annual credit report under federal law is AnnualCreditReport.com.

The FTC encourages people to post the videos on their own websites or blogs, and provides tools to help them do so. The jingles also are available as 30-second audio public service announcements at www.ftc.gov/freereports.

* Increased their interest rate 15%
* Increased their minimum payment due 11%
* Changed their due date 9%
* Lowered their credit limit 8%
* Reduced their rewards program 8%
* Closed their account 7%

“Despite efforts to get credit flowing again to consumers, for many, the exact opposite is happening,” said Adam Levin, chairman of Credit.com. “Even responsible consumers are discovering that a lowered limit or a closed account can impact their credit score for years. It is critical that business, government, public interest organizations and the media work together to significantly improve and expand credit and financial help and education.”

This national telephone poll was conducted for Credit.com by GfK Custom Research North America from February 20-22, 2009. A total of 1,004 interviews were completed, with 524 female adults and 480 male adults. The margin of error is +/- 3 percentage points for the full sample and higher for subgroups at a 95% level of confidence.

About Credit.com, Inc.
Credit.com, a leading consumer education and financial services company, is one of the Web’s premier personal finance sites. Credit.com was established in 1995 to give consumers access to comprehensive credit and financial education, straightforward answers, and “best of breed” credit products. The company’s goal is to help consumers of any credit standing navigate their financial life stages, from establishing and wisely using credit, to managing and rebuilding it. Credit.com works with industry experts to create clear paths for consumers looking to improve their finances. For more information, please visit: www.credit.com.

FICO 08 will eventually be the industry standard credit score despite not being available yet from Equifax or Experian. We should see FICO 08 at Equifax before the fall and at Experian as soon as they start losing customers to TransUnion or Equifax. Experian has alluded to the fact that their ongoing litigation with Fair Isaac over VantageScore is causing some stress in their relationship and delaying the roll out of FICO 08. The problem is eventually lenders are going to get sick and tired of getting caught in the middle of the ”Experian versus FICO” arm wrestling match and move their business elsewhere when they find out that Experian isn’t offering the new gold standard credit scoring model. When that happens you will be able to time the FICO 08 implementation at Experian with the second hand on your favorite watch.

So what is so different about FICO 08 and the other versions of the FICO score? There are three primary differences of note. They are:

1. Negligible Collection and Public Record Exclusion – The newest FICO score will ignore any collections or public records with an original amount less than $100. It’s important to note that for a collection to be bypassed by the score, thanks to the new logic, it has to be reported as a 3rd party collection agency account and not the collection department of a credit card company. If the collection shows up as “trade” then it will still count against your score even if it is less than $100. And, if the original amount was over $100 but it has been paid down to a current balance of less than $100 it will still count in your score. This is exceptional news for consumers who are haunted by low dollar collections caused by misdirected final utility bills and some insurance snafus.

2. Credit Card Utilization – Credit card utilization, the ratio of your current balances to your current credit limits on revolving credit card accounts, remains a highly important factor in your FICO credit score. However, in FICO 08 it takes on a whole new level of importance. Consumers who have balances that approach the reported credit limit will find their scores lower with FICO 08 than with previous versions of the scoring software. FICO’s research has apparently discovered that consumers who are highly utilized with their credit cards are more risky than they were in the past, hence the more punitive treatment.

3. No Piggybacking Allowed – This new version of FICO apparently has the ability to determine if an authorized user credit card account is an attempt to game the credit scoring system through piggybacking, which is the process whereby a consumer with poor credit would pay to be added to the credit card of someone with good credit as an authorized user. Fair Isaac will not disclose how they’re able to tell the difference between a legitimate authorized user account belonging to, say, a husband and wife versus one that has been made it to a credit report through other means, such as piggybacking. You will recall that FICO 08 was originally going to completely ignore all authorized user accounts. This new logic seems to split the difference between ignoring all authorized user relationships and doing nothing to discourage the use of piggybacking services.

So why does FICO 08 pose a problem for VantageScore? It’s actually quite simple. As long as FICO keeps improving what they refer to as their “classic” risk scores the less compelling it is for a lender to test, let alone switch, to a new score brand. Implementing a new version of FICO is much easier than implementing a whole new scoring model, like Vantage. In fact, a company called SubscriberWise has already implemented FICO 08 not more than two weeks after it became available.

The best advice for consumers who will begin to be scored with this new FICO score is for them to continue to do what they’re doing now. Continue to make all of your payments on time. Continue to work down your credit card balances as much as possible. Continue to apply for credit only when needed. If you can do all of these things then your FICO 08 score will be solid as a rock and, who knows, maybe your VantageScore will be solid too, although nobody will care.

About CreditCRM and Attorney Edward Jamison
Edward Jamison is the founder of Jamison Law Group and the creator of CreditCRM. He is an attorney and nationally recognized as an expert in credit repair and identity theft. Edward sits on the board of advisors for the National Association of Credit Services Organizations and has been the outspoken advocate for ethical credit repair since getting into the business in the year 2000. Edward has been featured as a credit expert on NBC, CBS, Fox, the Wall Street Journal, the Mortgage Market Guide, Mortgage Planner Magazine, the Mortgage Press, the Scotsman Guide, Broker Banker magazine and more.

Source: CreditCRM

Businesses across Canada, including banks, credit card companies and mortgage lenders, rely upon credit reports and scores as part of the process for evaluating consumers’ credit-worthiness. “We have consistently stated our willingness and desire to provide Nova Scotians with the same access to online credit reports that other Canadians have enjoyed,” said Tom Reid, Director of Consumer Solutions at TransUnion.ca.

“We view this recent decision by government officials as a real win for Nova Scotia residents who are now empowered to review their credit history right online, gain an understanding of how lenders are likely to view them and take steps to improve their own negotiation power.”

Beginning January 29, 2009 Nova Scotians can access their Canadian credit report and score at http://www.transunion.ca. The site also provides extensive, free, educational content that can be of value to any credit active consumer. “Since this is new territory for Nova Scotians, it’s important to note that
the simple step of checking your own credit regularly will not, in any way, harm your credit score and can really help you down the line,” added Reid.

About TransUnion
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Based in Toronto, with global headquarters located in Chicago, Illinois, TransUnion provides local service and support in Burnaby, Edmonton, Saskatoon, Montreal, Quebec City, Rimouski, Charlottetown, Halifax and St. John’s.

Source: TransUnion